327 F.

2d 356

Ray HAWKINS, individually and on behalf of all other

common
stockholders of The Tonopah Mining Company of
Nevada similarly situated, Plaintiff-Appellant,
v.
Thayer LINDSLEY et al., Defendants-Appellees.
No. 123, Docket 28198.

United States Court of Appeals Second Circuit.

Argued Oct. 31, 1963.
Decided Feb. 5, 1964.

Lillian Eichman, New York City, for appellant.

Wickes, Riddell, Bloomer, Jacobi & McGuire, New York City, for certain
defendants; Herbert J. Jacobi, New York City, of counsel.
Sullivan & Cromwell, New York City, for certain defendants; Marvin
Schwartz, New York City, of counsel.
Milton Pollack, New York City, for The Tonopah Mining Co. of Nevada;
Milton Pollack and Irving K. Rubin, New York City, of counsel.
Before SWAN, CLARK* and MARSHALL, Circuit Judges.
SWAN, Circuit Judge:

This is an appeal from Judge Levet's order of February 20, 1963, denying
plaintiff's motion under Rule 60(b)(1) and (6), F.R.Civ.P. to vacate various
judgments and orders previously entered in this much-litigated action, and
denying also plaintiff's motion under Rule 25(a), F.R.Civ.P. to substitute as
parties defendant the executors of certain deceased defendants. Plaintiff has
also appealed from denial on March 22, 1963 of his motion for reargument.

Assuming arguendo that Judge Levet was right in denying plaintiff's motion
under Rule 60(b), there was certainly no error in denying plaintiff's motion

under Rule 25 to substitute as parties defendant the executors of deceased

defendants.
3

As to plaintiff's appeal from denial of his motion for reargument, it will suffice
to note that an order denying reargument is not appealable. Pfister v. Northern
Illinois Finance Corp., 317 U.S. 144, 149-50, 63 S.Ct. 133, 87 L.Ed. 146;
Spampinato v. M. Breger & Co., 2 Cir., 270 F.2d 46, cert. den. 361 U.S. 944,
80 S.Ct. 409, 4 L.Ed.2d 363.

This is a derivative action commenced on July 26, 1957 by a stockholder of

The Tonopah Mining Company of Nevada. An amended complaint was filed
August 6, 1957.1 The amended complaint was dismissed with prejudice by
Judge Ryan on July 27, 1961. Sixteen months later, on November 28, 1962,
plaintiff moved for vacation of the judgment of dismissal and of several prior
judgments and orders. This is the motion denied by Judge Levet, from which
plaintiff has appealed.

The amended complaint sought to set aside sales by Tonopah of all the stock of
Tonopah Nicaragua Company which owned the Rosita mine located in
Nicaragua. Tonopah was registered under the Investment Company Act of
1940, 15 U.S.C. 80a-1 et seq., and the sales of Tonopah Nicaragua stock, one of
60 per cent of the stock in 1950 and one of the remaining 40 per cent in 1952,
were exempted by orders of the Securities and Exchange Commission based on
the necessary statutory findings. The amended complaint charged that the
transfer of the stock from Tonopah to Mines, Inc. had been made by Tonopah's
directors at a price unfair to Tonopah, and in violation of the Investment
Company Act of 1940, 80a-17. This section prohibits transfers between
'affiliated' companies without approval of the transaction by the Securities and
Exchange Commission. Since Mines, Inc. and Tonopah were affiliated, they
obtained the necessary approval. The amended complaint alleged that the
approval had been fraudulently obtained through concealment of material facts,
and that the directors had been derelict in their duties to Tonopah. Plaintiff
sought a judgment rescinding the stock transactions and granting other relief.
Four corporations in addition to Tonopah, and seven individuals were named as
defendants.

Four of the individual defendants resided in Pennsylvania and were never

served with process within the Southern District of New York. In September
1957 they moved for dismissal of the amended complaint on this ground. Their
motion was granted by Judge Noonan on July 3, 1958. He ordered that the
action as against these four, Nonamaker, Haehnlen, Alexander and
McWilliams, be severed, that the title of the action be amended, and that

judgment dismissing the action against them be entered.

7

On the same date Judge Noonan continued the action against the other three
individual defendants and the five corporate defendants; ordered dismissal of
the amended complaint to the extent that it sought to state a claim under the
Investment Company Act of 1940; and granted leave to plaintiff to file and
serve a second amended complaint in which he might state separately his claim
for relief under state law based upon alleged breach of fiduciary duty.2

Appellant's present counsel has presented the case with such confused prolixity
that it is difficult to follow her argument. In urging reversal of the order of July
3, 1958, which dismissed the amended complaint as against the four
Pennsylvania defendants, she apparently relies on the 'excusable neglect' of
plaintiff's former attorney Beaudry. But Mr. Beaudry did not become plaintiff's
attorney until more than three months after the amended complaint was
dismissed as to the Pennsylvania defendants. Judge Levet's dismissal as to them
was so clearly right as to require no discussion.

Assuming that Mr. Beaudry's neglect may have been prejudicial to plaintiff's
case against the other defendants, this would not avoid the one year limitation
of Rule 60(b)3 nor are the circumstances so extraordinary as to make applicable
60(b)(6).4

10

The other orders and judgments challenged by the motion are the order of
September 25, 1958, the order of June 1, 1961, the judgment of June 22, 1961
dismissing the action without prejudice and the judgment of July 27, 1961
dismissing it with prejudice.

11

The order of September 25, 1958, by Judge Noonan, dismissed the claim
against Tonopah for relief under the Investment Company Act of 1940; directed
that the amended complaint under state law for alleged breach of fiduciary duty
be separately stated in a further amended complaint, and ordered plaintiff to
furnish security to Tonopah under section 61-b of the New York General
Corporation Law, McKinney's Consol.Laws, c. 23 in the amount of $50,000.

12

The order of June 1, 1961, again by Judge Noonan, denied plaintiff's motion to
vacate or modify the order of September 25, 1958, requiring the posting of
security pursuant to section 61-b of the General Corporation Law of New York.
Plaintiff failed to post security and on June 22, 1961 Judge Ryan ordered
dismissal of the action without prejudice. Thereafter on July 27, 1961 Judge
Ryan ordered dismissal with prejudice.

13

Plaintiff appealed from the judgment of June 22, 1961, and of July 27, 1961.
The notice of appeal was filed August 29, 1961. Defendants moved to dismiss
the appeal for failure to take it within the time fixed by Rule 73(a), F.R.Civ.P.
This court dismissed the appeals by orders dated October 23, 1961 and
November 28, 1961. A petition for rehearing was denied December 28, 1961.

14

Appellant apparently also contends that the judgments and orders he seeks to
set aside are void within Rule 60(b)(4). We see no basis for holding any of the
judgments or orders void. It is contended Judge Ryan's judgment of dismissal
with prejudice was void because entered when plaintiff's notices of appeal from
prior orders were pending After Judge Ryan's dismissal without prejudice
defendants moved on June 30, 1961, to amend the judgment to provide
dismissal with prejudice. It was not until July 1 and July 21 that plaintiff filed
notices of appeal. Prior to those dates defendants' motion had been presented to
the District Court. Hence Judge Ryan had jurisdiction to grant it. See United
States v. Crescent Amusement Co., 323 U.S. 173, 177-8, 65 S.Ct. 254, 89 L.Ed.
160; Napier v. Delaware Lackawanna and Western R. Co., 2 Cir., 223 F.2d 28,
30-31.

15

Plaintiff also contends that Judge Noonan's original order of July 1958
dismissing the federal claim was void; this invalidity, he contends, makes void
all subsequent orders. Plaintiff relies on language in Schwartz v. Eaton, 2 Cir.,
264 F.2d 195, cited by this court in dismissing the plaintiff's appeal from the
order of July 1958. At page 197 of 264 F.2d, the opinion said that 'the district
court's action in attempting to dismiss a part of plaintiff's legal theories appears
a nullity.' The context and citations reveal that 'nullity' meant only that the
district court's order had no effect on the litigation

16

Plaintiff also relies on that part of Rule 60(b) permitting an independent action
to relieve a party from a judgment or to set aside a judgment for fraud upon the
court. Plaintiff's contention regarding fraud upon the court is no more than an
attempt to prove that the defendants made misrepresentations to the S.E.C. in
obtaining the original exemption order. That very issue was argued in 1958
before Judge Noonan, and no claim has been made that officers of the court
attempted to secure action of the court on the basis of documents known by
them to be false. Some such conduct seems to be required for a finding of fraud
on the court. See Moore, Federal Practice 60.33, at 512, as amended by 1962
Supp., page 24, and Martina Theatre Corp. v. Schine Chain Theatres, Inc., 2
Cir., 278 F.2d 798, 801. Judge Levet was correct in refusing to treat the motion
as an independent action on the ground of fraud. None of the other possible
grounds for sustaining an independent action has been proved. See 7 Moore,
Federal Practice 60.12-60.15 (2d ed. 1955).

17

The denial of plaintiff's motions is affirmed.

Judge Clark heard oral argument and participated in the decision of this case,
voting to affirm. He died before the opinion was written

Federal jurisdiction was claimed both under the Investment Company Act of
1940 and under diverse citizenship

After repeated extensions of time granted to plaintiff to perfect his appeal,

plaintiff's appeal from the judgment and order of July 3, 1958 was dismissed on
October 3, 1960 for want of an appealable order, and plaintiff's motion for an
extension of time in which to file his brief and appendix was denied.
Subsequently an application for rehearing was denied by this court

Terhune v. American Export Lines, Inc., 24 F.R.D. 70 (S.D.N.Y.), affirmed 2

Cir., 271 F.2d 127; Costa v. Chapkines, 2 Cir., 316 F.2d 541

See Ackermann v. United States, 340 U.S. 193, 199-200, 71 S.Ct. 209, 95
L.Ed. 207